Spot Market or also called Limit Order, is the process of buying or selling digital currency at a price determined by the user, in the sense of not using the selling/buying price listed in the Order Book but becoming a Market Maker. Traders who buy and sell Bitcoin using this method will usually incur lower transaction fees/fees, and can trade Bitcoin at the price they want, but sometimes have to wait a while for the order to be executed.
Spot Market Characteristics
- Transactions are settled at the prevailing price known as the spot price or spot rate.
- Asset delivery is carried out immediately or otherwise on T+2.
- Instant funds transfer; otherwise, the solution can be at T+2.
Market Spot Type
There are two main types of spot markets
1. Over-the-Counter (OTC)
Over-the-counter (OTC) is a place where buyers and sellers meet to trade bilaterally through consensus. There is no third party supervisor of a transaction or a central exchange agency to regulate trade. The assets traded may not be standardized in terms of quantity, price, or other terms, as is the norm on organized exchanges.
2. Market Exchanges
In organized market exchanges, buyers and sellers meet to bid and offer available financial instruments and commodities. Trading can be carried out on electronic trading platforms or trading floors. Electronic trading platforms have made trading more efficient, where prices are determined instantly, given the large number of trades across multiple exchanges.
Exchanges handle several financial instruments and commodities, or they may carve a niche in certain types of assets. Trades are usually settled through broker exchanges which act as market makers. Assets traded on exchanges are standardized, according to exchange standards.